Archive for the ‘New Zealand’ Category

Immigration has become a popular topic in NZ with many ‘experts’ presenting ideas on how the system could be improved. This is an important discussion, but to make it more productive it would be helpful if the ‘experts’ could first take a look at the current system, previous systems applied and immigration patterns. This would help us avoid people ‘fixing’ the system by:

‘introducing’ ideas which are current policy;

re-introducing ideas which have previously proved flawed;

confusing temporary visa rules with those relating to residence;

blocking occupations in key areas NZ needs.

Understanding the system before you ‘fix’ it helps avoid the risk of repeating the errors of the past, throwing away sections which work well, damaging NZ businesses and the ability for NZ workers to get training and jobs, and of course fend off the ever-present spectre of the law of unintended consequences.

Oh, and statistics can be useful, but please use the right ones (to talk about ‘residents’ for example use the dataset which measures ‘residents’). Seizing on statistics which affect one or two people a year to discuss the entire system is also unhelpful.

New Zealand immigration is an important area of debate with lots of ideas and opinions – to ensure immigration continues to provide a benefit it must be carefully managed as there are definitely pros and cons.

This week I saw an article on NewsHub ‘Expert calls for poll tax on immigrants‘ that I wanted to discuss, mainly because this is an important debate and the ‘expert’ Mark Keating had not helped one bit by getting his numbers very badly wrong.

“A tax expert says there should be a poll tax on immigrants of up to $15,000 to help cover the cost of extra infrastructure and services needed by a growing population.”

A migrant tax
The idea of a migrant tax is not new – last year migrants paid $201 million in fees and $15.4 million in levies, this is used against the costs of the immigration department and other services.

In December 2015 levies were extended to cover all visa applications – previously only people getting residence paid a levy – meaning more cash: the $17 now applied to every student visa application alone should bring in an additional $1.7 million in income per year.

The article about Mr Keating quoted an estimated additional $100 billion would be needed over the next 10 years to cover costs of hospitals, schools, roads and services to cope with population growth. New Zealand’s population grew by 97,300 (2.1%) in the year to June 2016, Statistics New Zealand estimates 71% of that growth is as a result of immigration with 29% being a natural increase so this is an important discussion we need to have.

Mr Keating has calculated that on current immigration figures, a tax of $10,000 would raise more than $896 million a year, and at $15,000 it would raise more than $1.3 billion.

Who would pay the tax
Before we get into the numbers I wanted to know who would pay this poll tax, currently all applicants – whether for a 3 month visitor visa or residence pay a levy. Quotes attributed in the article to Mr Keating indicate this is aimed at people coming to live in New Zealand permanently – to ‘join our club’ and to ‘share in everything New Zealand has built up’. It would seem a little unfair to charge $10,000 to temporary students and workers right?

Each individual would pay the poll – a family of four would pay four amounts and so would partners and children of New Zealand citizens returning from abroad. Mr Keating is not applying this to Australian citizens (25,681 arrived in the year to Jan 2017), refugees or people filling skill shortages.

How much would each person pay?The target would be $7.1 billion (that 71% generating their share of $10 billion needed a year) and Mr Keating suggests each person should pay between $10,000 and $15,000 to raise between $896 million and $1.3 billion per year. A family of 4 would then pay between $40,000 and $60,000 on top of current levies and fees.

Currently migrants bring in between $2 billion and $3 billion a year net of costs but that gets spent into the economy rather than paid to the government.

$10,000 to $15,000 sounds a lot but unfortunately Mr Keating has got his numbers wrong. Had Mr Keating used correct figures from data set he appears to be applying instead of between $10,000 and $15,000 to raise the sums suggested individuals would need to pay between $53,632 and $80,435 each!

That New Zealander returning with a partner and three children would need to pay between $214,495 and $321,743 to get their family in to the ‘old country’.

Why are these calculations wrong?
I have to make an assumption here but I think it’s a reasonable one, bear with me. The article on NewsHub was quite light on details making it harder to check the calculation however an earlier article published by the University of Auckland gave more information.

In the year to January, there were 89,670 permanent and long-term arrivals to New Zealand, excluding refugees, Australians and returning New Zealanders. At $10,000 per arriving person, that would generate $896,700,000. At $15,000 per migrant, it would total $1.345 billion.

Unfortunately and unusually the figure of 89,670 migrants is not referenced but I think we can work out where it came from. The article specifically mentions figures to January 2017. There are two sources of immigration data: Statistics New Zealand and the immigration department. While Stats NZ provides monthly reports data from Immigration New Zealand tends to be annual to June.

Statistics NZ’s monthly report on ‘Permanent and Long Term Migration’ (PLT) to January 2017 confirms 89,670 people arrived who were not ‘NZ and Australian citizens’ or ‘other’. As this is quite a specific number I think we’ve found the source of these figures.

The problem with using this figure is that only 16,722 of this group confirmed they were staying NZ permanently, the other 72,948 were temporary visitors, workers and students:

Visa type

Number

Percentage

Residence

16,722

18.6

Student

24,297

27.1

Work

42,415

47.3

Visitor

6,236

7.0

Total

89,670

Applying this number gives the individual poll tax of between $53,632 and $80,435 to achieve the same income. To calculate a levy which would be applied to people being granted residence it might have been more useful to:

In the year to June 2016 for example Immigration New Zealand statistics confirm 52,052 people were granted residence (excluding Australian citizens). If you drop off the other people Mr Keating suggests – people filling skill shortages and refugees – the poll tax would fall on the remainder of roughly 38,000 made up of investors, entrepreneurs and partners and children (of New Zealand citizens, residents and workers filling skill shortages).

This is why it is important to consider who will actually be paying this amount – the returning New Zealander with a partner and three children might only need to pay as little as $102,388 to be allowed to bring them into the country.

We need a serious discussion but could it please be based on applicable evidence and facts! It’s a shame NewsHub and the University of Auckland didn’t check in to these claims before publishing them.

Reading the following sentence, attributed to Lyn Sparks of Business Immigration Ltd in a news article today put chills down my spine:

“We get licensed every year don’t we”

Mr Sparks was apparently replying to questions about his activities following complaints lodged by 66 of his clients that he had breached the strict rules licensed immigration advisers must adhere to. His implication appears to be that he must be acting properly because he is licensed each year by the Immigration Advisers Authority (IAA).

The article explains:

All workers have similar complaints – primarily that they were charged fees of up to $15,000 for a job in New Zealand through Business Immigration and its overseas agents. Many took out loans in the Philippines to cover the fees, and were paying between 40 per cent and 50 per cent annual interest.

The reason I find this comment attributed to Mr Sparks chilling is that he appears to be using the status afforded by a poorly implemented but well-meaning licensing regime to prey on migrants.

This comment of course is entirely misleading and highlights deep problems with the licensing of immigration advisers which has dogged the system since its introduction in 2009 such as:

Protection for consumers only applies to immigration services
Section 44 of the Immigration Advisers Licensing Act 2007 only allows the IAA to accept complaints against advisers regarding “provision of immigration advice”. While you might expect advisers to be held to account for any actions as a professional that’s not the case at all. Advisers getting up to no good in any other area – for example recruitment – have nothing to fear from the IAA as any complaint will be rejected.

History has shown that the IAA will only act (for example to take away a licence) if the individual is convicted of a crime under another piece of legislation. This issue was raised back in 2009 but requires a change in the law and nothing has happened about this.As a result the actions of advisers charging for job search services are not covered at all by the licensing rules with few people realising this, creating opportunities for the unscrupulous.

No test of competence
While many long-standing advisers are highly competent this competence, effectively assured by licensing, has never actually been tested. When licensing was introduced in 2009 advisers working in the industry were required only to show three case files (which they picked) to be assessed by IAA staff to confirm the adviser’s competence. This alone is a poor test and I understand the IAA staff assessing these applications had no training or background in immigration.

From there to renew their license each year advisers only had to provide one case file (which again they picked) to be assessed by the same IAA staff. Interestingly while this process did check business systems it stopped checking prices charged some time ago following pressure from long-standing advisers who did not appreciate being questioned in this regard.

It wasn’t until 2012 that a level 7 qualification was introduced to provide a test of competence completed to any defined standard, however existing advisers did not have to sit this. Thankfully the IAA is now moving towards a system of randomly checking the work of advisers based on the records of the immigration department. This is excellent as it should identify problems and patterns, but it still will not spot issues like advisers charging excessive fees as suggested in this case.

It will be interesting to see what happens with this story. Mr Sparks has faced complaints and penalties before but is still operating. The IAA has indicated there has been insufficient evidence to take up this case but public awareness of this problem may force their hand.

Under this is the truth that the IAA can only investigate and punish for actions relating purely to the provision of immigration advice and in the past has taken a very narrow view of this, potentially allowing bad advisers to escape punishment as a result.

A strong and robust IAA is badly needed but currently it looks weak and indecisive. Let’s see what is done following these complaints.

Christchurch rebuild manager unfairly sacked
A piling manager recruited from England and sacked in his first 90 days has won nearly $40,000 from his Christchurch employer.source

Basically the employee started work in January 2014 but didn’t sign his employment contract until February 2014.

Hickey ruled the 90-day clause was invalid because the Employment Contracts Act said such provisions could not be imposed on existing employees. Hall and Smith Crane had not signed the individual employment contract before Hall began his job. By the time he signed the contract, he was an existing employee.

90 day clauses cannot be applied to existing employees – including those who have completed a free trial – and this sets an interesting precedent of what is an ‘existing employee’.

Of course this situation should never have occurred:

It is illegal for an employer to start you in the job without a signed contract.

To get a work visa to work for a specific employer (like an essential skills work visa) the migrant has to prove Immigration New Zealand (INZ) with a signed employment contract, it’s a mandatory requirement and the INZ have to be satisfied that the employer meets all New Zealand employment and immigration laws. .

Mind you, I had a migrant come in to see me the other day for advice who already had a work visa but hadn’t signed his contract yet – the immigration case officer processing his visa application hadn’t noticed. Government plans to automate the granting of work visas soon through online applications, I wonder if that will improve quality control.

There are a couple of things to take out of this article:

The Employment Relations Authority – www.era.govt.nz
This organisation is there for you (even if you are on a work visa) to protect your employment rights.

Employment law
Migrants coming in to NZ to work for a specific employer need to understand the employment laws here, for example:
– the 90-day trial period and what is means;
– Unpaid trial periods are illegal and risk your visa application;
– You must have an employment agreement from day one;
– This must have clauses which protect you (such as holidays);
– You must have a minimum of 30 paid hours pw guaranteed.

The immigration and employment laws around this area are in place protect you and are there for a reason ;o).

Today on current affairs programme ‘The Nation’ Winston Peters, leader of the New Zealand First (NZF) political party confirmed:

“We’ll cut immigration to people we need in our economy, not who need us.”

He went on to state:

“Half the people coming and more are not here to make any contribution until 21 years or more or never to make a contribution. That’s bad economics.”

So here we have another political party going into the 2014 election trumpeting that immigration is economically bad for New Zealand and needs to be cut.

New Zealand First policy
To find what Mr Peters meant I checked the NZF website and found recent confirmation that he intends to block migrants who are not in the skilled category.

As I confirmed in May on average just under 40,000 people come to live in New Zealand permanently every year. These are made up of four main streams – using 2012/13 figures roughly these are:

51% – skilled workers, entrepreneurs and investors

29% – the foreign-born children and partners of New Zealand citizens and residents

11% – the parents and family of migrants

8% – humanitarian and pacific quotas

This policy then appears to plan to cut groups 2, 3 and 4 including parents of migrants, the foreign-born partners and children of New Zealanders and NZ’s humanitarian work.

The NZF immigration policy is basically a list of current immigration policy (for example the parent category is called the ‘capped family stream’ because it is capped with a quota already) with additional measures to:

protect migrants against exploitation;

push skilled workers into regions and out of Auckland;

remove the ability for some migrants (not skilled workers) to purchase pre-paid English lessons to meet requirements.

Forcing skilled workers needed by employers to live in remote areas where there are no jobs is an interesting idea that I don’t think will catch on – yes you can work remotely as an IT professional but it is a bit harder for engineers etc. The others points listed are tiny tweaks with the vast majority of what NZF stands for already being current immigration policy.

Cutting immigration
Mr Peters has spoken out previously against the parents of migrants in the “Capped family stream”. These (not including other family) make up 9.5% of residence numbers with Chinese parents (the group Mr Peters is most concerned about) being (last year) 43.8% of this. Parents of people born in China make up just over 4% of residents.

The “Uncapped family stream” Mr Peters appears to have most problem with (29% of residence visas) are the foreign-born partners and children of New Zealanders. I am not sure blocking this group from coming to NZ is something which would be supported by most Kiwis.

Government has been working to bring skilled New Zealanders working overseas home but forcing them to leave their partners and children behind may make many think twice about heading back to Aotearoa.

Economic benefit
Mr Peter’s comments also ignore government research from the 2006 census which confirmed in 2008:

“…overseas-born migrants contributed $8.1 billion to the economy in 2006, while using $4.81 billion in benefits and services. In comparison, New Zealand-born citizens contributed $24.76 billion and used $21.92 billion in benefits and services.

The net impact for having an immigrant here is $3.29 billion, or $3547 per capita, while the net per capita contribution of a New Zealand-born is just $915,..”

This related to all migrants, not just skilled workers. Healthy and law-abiding migrants trained overseas are economically beneficial to New Zealand, but often because they are supported by their partners. Their children are also needed as future workers to support an aging population if the concepts of “retirement” and “pension” are to continue in this country.

Summary
I’m not sure New Zealand First’s policy will win the hearts and minds of New Zealanders by blocking their husbands, wives and children from entering the country – they might want to think this through.

So the NZ Labour Party is proposing to cut immigration to help reduce the rapidly rising cost of housing. There has been a lot of confusion about how this is intended to be done – whether to cut temporary visas or residence visas for example.

Labour leader David Cunliffe is now stepping away from the more contentious comments, indicating the whole thing has been a media beat up. While to some degree this may be true I clearly remember Mr Cunliffe stating there is “open slather” on the current immigration system. So is there “open slather”?

Ignoring historyThe party appears to have settled on visas being issued through the Skilled Migrant Category as the problem – people on temporary work visas generally don’t buy houses – but this ignores history.

Skilled Migrant is the largest residence stream and is managed through a points system. The Labour Party have most recently indicated they would use this points system to manage numbers on the basis that reducing numbers would reduce pressure on house prices.

I say this ignores history as over the past five years the Skilled Migrant Category has been slashed by a third. This reduction has had no apparent effect in lowering house prices.

Here is a graph of residence visas granted since 2008/09:

Source: Immigration New Zealand Residence programme statistics
As 2013/14 figures are only available to 4 May (307 days of the year) I have calculated a figure based on this for 365 days.

To explain the categories:

Skilled Migrant – skilled workers meeting a stringent points system.

Other business/skilled – investors, entrepreneurs etc.

Humanitarian – refugee quota, pacific quotas.

Capped family – family members of migrants (only parents can use this now).

Uncapped family – foreign-born partners and children of NZ citizens and residents.

Changes since 2008/09Clearly the Skilled Migrant stream is by far the largest single stream and this is because the residence programme is designed to fill skill gaps.

While most of the streams have changed very little, numbers coming through the Skilled Migrant stream are down by 32%. Over the past five years nearly 32,000 less people have gained residence visas through this category compared to 2008/09 levels.

Manipulating the points system

So why have these numbers fallen so far? Because government has been managing numbers using the Skilled Migrant category points system – the same tool Labour proposes to use to reduce house prices now.

Government has incrementally been raising the bar on the Skilled Migrant points system since January 2010 by reducing the types of applications accepted – at the first stage called Expressions of Interest or EOIs.

For example before January 2010 any EOI scoring 100 points or more stood a very good chance of being selected to begin the process. Since January 2010 – across 112 selections – only EOIs with bonus points relating to skills in long term shortage have been selected.

Additional changes in June 2011 and January 2013 further reduced this to the point where the only EOIs being routinely selected now are those with 140 points or a skilled job offer. All of the data is provided by the immigration department and available for analysis.

The natural result of less people entering the system has been less visas being granted: using the points system to manage numbers.

Source: Immigration New ZealandAgain as 2013/14 is incomplete I have used the average for this year for the last 3 selections to go to complete a total year figure.

I am not aware of a resulting drop in the cost of housing in New Zealand.

I am aware however of a huge increase in skill shortages with 59% of employers reported as struggling to find key staff. Skill shortages directly reduce the number of jobs and training opportunities for New Zealanders while lowering wage growth and company profits – arguably one of the reasons the NZ economy has failed to pick up.

The original quotas were set at a level in 2002 for a reason and had been working very well. Since these changes were implemented government has missed minimum quota levels by an average of over 4,600 per year (10%).

Summary
Labour’s proposal then is for more of the same to produce a different result.

Wasn’t it Albert Einstein who defined insanity as “doing the same thing over and over again and expecting different results”?

The Labour Party, in the lead up to this years’ election, is proposing to cut immigration to help reduce the rapidly rising cost of housing as covered in the Press today and echoed by Phil Twyford on The Nation this morning.

“Labour’s proposal would, in part, see the “points system” under which skilled migrants get entry to New Zealand tweaked in response to net migration flows.”source

So what’s wrong with this policy?

Well there are quite a few problems, but the main one is that doesn’t work.

A few issues
Some of the main issues with this have been identified in todays’ article, for example that the Permanent and Long Term Migration figures being used cover everyone coming in for a year or more (working holidaymakers, students, temporary workers and residents), the vast majority of which would have no intention of buying a house here.

When Labour talks about the “points system” what they mean is a system used in assessing applications under the Skilled Migrant Category (SMC) of New Zealand’s Residence Programme. Points are awarded for age, work experience, qualifications with weighting towards having skilled employment here, especially if this is in an area of long term skill shortage.

There are a number of problems with using the SMC to manage immigration like this such as:

Time lag
It takes on average between 8 and 12 months for an application to go through this process, longer if the person is offshore. Any changes will take a very long time to have an effect.

Numbers
If Labour is planning to use this immigration route to manage immigration by 25,000 to 35,000 there is a problem – only 18,156 visas were granted through this stream last year. A cut could easily see the entire stream canned.

While some people might think that would be a good idea, remember that NZ is in an international battle for skills, trying to attract top migrants here to fill skill gaps. We’re not talking about gaps which can be met by training a few I.T. graduates as the article suggests, we’re talking about attracting qualified professionals who already have years of experience.

I was talking to a Christchurch employer recently who confirmed for every highly skilled foreign worker (usually with 10+ years of experience) they employed they could employ and train at least 2 New Zealanders.

Incentive
So under this policy SMC points will move around in an unpredictable way. Is it an incentive for migrants to have to pay $2,320 to enter a system where the goal posts are continually moving? We need more transparency in immigration, not less.

Ignoring history
Finally there is one major problem with this policy – it doesn’t work. We know it doesn’t work because it hasn’t.

Successive changes were made by government in January 2010, June 2011 and January 2013 to make the SMC points system harder to get through, as a result visas granted have dropped by 32.78% compared to 2008/09. The effect of this has been nearly 32,000 less people allowed residence visas under SMC during the past five years.

What effect has this had on Auckland house prices? Why would further cuts have a different effect?

Interestingly during the same period (25 July 2011) “residential property development” was added by the government to the list of acceptable investment types for wealthy overseas investors to apply for visas here. Just sayin’.

Interview with CanterburyTV news today about immigration, the rebuild and what the effects of cutting work visas might be.

We’re right in the heart of Christchurch providing advice to rebuild employers and workers every day. Immigration has become a key issue, but mostly because people are being scared by misused statistics and partial information often confusing permanent and temporary migration.

Work visas holders are here only because we need them and cannot find NZ workers to do jobs that need skills and years of experience – apprenticeships are vital for local youth, but unemployment for men here is down to 2% and to rebuild we need mostly experienced experts overseeing a smaller number of trainees.

Training in many areas has really taken off because of the overseas experts helping our local tradespeople in giving those with an aptitude tuition and oversight. You can’t train an electrician, plumber or stonemason overnight, but because of the work visa holders many young New Zealanders are beginning careers now that will help this country into the future long after those visas have expired.

From these stats it is clear numbers have changed since last year due to:

16,151 less NZ citizens leaving the country;

3,267 more NZ citizens arriving in NZ; and

9,954 non NZ citizens arriving.

So roughly 66% of the change was the movement of NZ citizens, 18% was an increase in the number of Australians coming to NZ and 15% was ‘everyone else’.

As a point of interest the only aspect of immigration which is not carefully controlled or managed by the NZ government relates to Australians – citizens and permanent residents can simply get on a plane and are automatically handed residence visas at the border.

This year there was an increase of 5,391 Australian citizens coming to NZ, a rise of 34%. I wonder how many of the 15% ‘other’ were permanent residents of Australia, the stats do not show this.

By comparison looking at the other countries there were:

1,186 more Indian citizens;

736 more Chinese citizens;

662 more German citizens;

402 more US citizens;

262 more South African citizens; and

16 more UK citizens.

Blind statistics
Using these statistics however does not give detail on why people came to NZ or how long they planned to stay – we only know they intended to stay for a year or more.

My last post looked at residents only – those you could argue who are most likely to buy a house – asking which of these the politicians would cut.

Perhaps it would be better to look at all of the visas issued last year which would be likely to be for a year or more to compare more closely with the figures being used by politicians.

Looking through the immigration department statistics on visas issued in 2012/13:

14.6% were residence visas – arguably the most likely to buy a house as they stay permanently. Of those 11,291 were the partners and children of New Zealand citizens and residents.

21.3% were foreign fee paying students who paid around $1 billion to study here last year, spending around $848 million on accommodation etc.

19% were young people on a 1 year working holiday visa, these were required to bring collectively at least $210 million into the country to spend.

17% were skilled workers (temporary and permanent) where employers had proved they could not find NZ workers to do the job offered (paying taxes, filling skill gaps, creating jobs and training NZ citizens).

Another 10% were partners (of visa holders or NZ citizens) on temporary visas.

That’s a total of 82.4%.

The remaining visas went to refugees (1%), children studying at school (3.3%), parents of visa holders (1.7%) etc.

If numbers are going to be cut where will the politicians start I wonder?

Cutting immigration has become a key election issue on both sides of the political spectrum.

Labour leader David Cunliffe has recently been reported on the NBR website indicating Labour would slash the net migration flow from 40,000 — which he claims is overheating the property market — to between 5000 and 15,000.

So what would this mean?

Net migration
There are different measures of migration and Mr Cunliffe would be talking about Permanent and Long Term migration, or the New Zealand Residence Programme as both average just under 40,000. As we’re talking about the housing market it would make sense to look at how this would impact on residence visas issued.

On average just under 40,000 people come to live in New Zealand permanently every year. These are made up of four main streams – using 2012/13 figures roughly these are:

51% – skilled workers, entrepreneurs and investors

29% – the foreign-born children and partners of New Zealand citizens and residents

11% – the parents of migrants

8% – humanitarian and pacific quotas

So if immigration was cut, who would still get through? Are we just talking about foreign workers? The following is a view of the idea of these cuts using actual immigration figures from 2012/13:

5,000 places
I guess the individuals getting first option would be those NZ legally has to take under agreements and treaties – around 2,200 people.

Second option would presumably go to the children of NZ citizens and residents – around 1,200 places.

There would sadly only be just under 1,500 places for the foreign-born partners of kiwis with 85% (around 8,500) losing out.

This would leave no spaces for skilled workers or investors. I am guessing parents of migrants and other humanitarian cases we are not legally required to take would be at the back of the queue, no space for them either.

15,000 places
Expanding the number of places to 15,000 would enable all of the children and partners of NZ citizens and residents to get through – phew!

There would be space for around 883 skilled workers and their families (assuming the current rate of 1.65 people per application continues). Parents and other humanitarian cases would presumably lose out.

The effect of this change
I won’t go into how this policy might affect NZ, I’ll leave that to your discussion, but I’ll pose some questions:

Will it be an incentive for kiwis to return to NZ if their families are not allowed to come too?

Certainly food for thought. The migrant quota has been in place for many years (i.e. under Labour and National governments) providing benefit to NZ quietly year by year with balanced and controlled migration.